HIDDEN INFLUENCES (COGNITIVE BIAS) IN BOARD REPORTING

Recognizing Cognitive Biases in Board Reporting

We can’t always trust our intuition due to natural faults and biases of the mind.

Cognitive traps can significantly impact how leaders make decisions in the boardroom and around the executive table. Understanding these hidden forces can transform your approach to reporting, discussions and decisions.

1. Anchoring Bias

🔹 What It Is: Over-reliance on the first piece of information received

🔹 Example: A CEO presents optimistic projections first, influencing the board’s reaction

2. Framing Effect

🔹 What It Is: The way information is presented affects decision-making

🔹 Example: “90% success rate” vs. “10% failure rate” – same data, different impression

3. Hindsight Bias

🔹 What It Is: Believing past events were predictable

🔹 Example: “We knew there was a risk of a market downturn” (to minimize prior poor choices)

4. Sunk Cost Fallacy

🔹 What It Is: Continuing a project because of past investments rather than future benefits

🔹 Example: “We’ve already invested $2M in this initiative; we can’t stop now”

5. Overconfidence Bias

🔹 What It Is: Overestimating the accuracy of one’s knowledge or predictions

🔹 Example: “Our forecasts have always been right” or “We don’t need risk contingency plans”

6. WYSIATI – What You See Is All There Is

🔹 What It Is: Overlooking missing information

🔹 Example: “We haven’t had any complaints so there doesn’t appear to be a problem.”

Bonus: Group Think

🔹 What It Is: Pressure to conform so individuals are reluctant to raise differing ideas

The topics that management present to the boards and what they tell them has an impact on board discussions and decisions.

📌 Get the cheat sheet Recognizing Cognitive Bias in Board Reporting to spot and mitigate biases in board and executive communication.